Interest rates cut unlikely economists say, as data shows rise in home loans
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Version 0 of 1. A rise in home loan approvals of 1.1% during November makes another cut in interest rates increasingly unlikely, an economist says. Commonwealth Bank chief economist Michael Blythe said the figures from the Australian Bureau of Statistics (ABS) published on Monday meant the Reserve Bank would not cut the cash rate again during this cycle. "Interest rate sensitive parts [of the economy] like housing, as we've seen today, are moving," he said. "You don't need any more help from that perspective and the sectors that do still need help would benefit more from a lower currency." Home mortgage approvals rose to 52,912 in November, compared with 52,321 approvals in October, the ABS said. Total housing finance by value rose 1.7% in November, seasonally adjusted, to $26.9bn. Blythe said interest rates were likely to rise from the current record low level of 2.5% in late 2014 as a weakening Australian dollar added to inflationary pressures. But National Australia Bank senior economist Spiros Papadopoulos said that although the housing market was strengthening, it would not be enough to rebalance the economy as the mining investment boom winds down. Unemployment would continue to rise, meaning the Reserve Bank of Australia would be unlikely to raise the cash rate this year, he said. "This is another indicator that points to the strength in the housing market, alongside rising house prices," Papadopoulos said. "We think there's still going to be a hole left in the investment outlook and although the housing and construction part of the equation will be supporting growth, the other non-mining sectors will still be quite soft and not strong enough to offset the mining slowdown. "We don't think it's going to be enough overall, which is why we think the unemployment rate is going to head higher and why the RBA won't be in a position to raise rates this year." His gloomy view of the labour market was supported by another set of figures on Monday which showed that the number of job ads fell in December for the third straight month. Internet and newspaper advertisements at the end of last year fell by 0.7% to 124,786, compared with 125,657 in November. In the year to December, the number of advertised positions dropped 9.1% but the annual pace of decline was the least severe since August 2012. ANZ head of Australian economics Justin Fabo says the non-mining sector is showing signs of recovery. "Job ads in NSW, the most populous state and one less dependent on mining activity, have been trending modestly higher over the past six months," he said in a statement. "More broadly, retail sales growth and building approvals have strengthened, assisted by lower interest rates, higher asset prices and the lower Australian dollar." Economists are expecting Australia's jobless rate for December to hold steady at 5.8% when official data is released on Thursday. Our editors' picks for the day's top news and commentary delivered to your inbox each morning. |